McDonald's share price jumps despite continued fall in sales

 
Joe Hall
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Customers in Japan remain suspicious of the company's food safety. (Source: Getty)

The figures

McDonald's share price shot upwards in early trading after the fast food giant announced a return of $1.4bn to shareholders through dividends and share repurchases.

Yet the rising stock masks what was another poor quarter for Ronald and co. Sales at company-operated restaurants decreased by 13 per cent to $3.9bn in the first quarter reflecting "negative guest traffic in all major segments" while total revenue dropped by $741m to $5.96bn.

The strong dollar contributed to an earnings per share fall of 31 per cent to $0.84 per share.

So the famous golden arches continue to wobble, with results marking a fourth consecutive quarter of sales and decline. There really was little reason for cheer as the company reported struggles across the board.

In Asia Pacific same-store sales fell 8.3 per cent with the company up against perception issues of poor food safety in Japan and China. Sales at stores in the Middle East and Africa fell 7.3 per cent while Europe also recorded a drop of 2.9 per cent. In the USA, the new menu items and promotions failed to trump stiff competition.

Things aren't likely to get much better any time soon either, with chief financial officer Kevin Ozan forecasting further sales falls in April.

Why it's interesting

Although the results reflect continuing struggles at McDonald's, they are largely in line with analysts' expectations.

The company has been lambasted by franchisees who have slammed it as "doomed" and without an idea of how to incite a turnaround. In a survey from analysts Janney Capital Markets, franchise operators said: "McDonald's system is broken. They talk menu reduction to help our people, simplify our menu for customers, but add products to help sales and it does not work. We continue to fall and fail."

Revealed in today's results is that the company has a built new "turnaround plan" to be unveiled on May 4. Although no details were included, investors appear somewhat confident chief executive Steve Easterbrook can get it right this time around.

What McDonald's said

We are committed to positioning the Company for long-term growth. We took a meaningful step in the first quarter with the decision to close under-performing restaurants that are not contributing to our profitability. While we continue our efforts to regain our business momentum and improve sales at our more than 36,000 restaurants around the world, our current performance reflects the ongoing pressures on the business. April global comparable sales are expected to be negative.

- McDonald's chief financial officer Kevin Ozan

In short

No one's lovin' it, as McDonald's sales fall across the globe. But with a new chief executive and a turnaround plan to be unveiled shortly, investors are clearly holding out.

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